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HomeMy WebLinkAbout2001/08/15 - Agenda Packet - Spec(Power Dynamics) AGENDA RANCHO CUCAMONGA CITY COUNCIL Special Workshop August 15, 2001 - 3:70 p.m. Civic Center - Training Conference Room 10500 Civic Center Ddve Rancho Cucamonga, California A. CALL TO ORDER .. 1. Pledge of Allegiance 2. Roll Call: Alexander.. , Biand , Cumtal~ , Dutton., , Williams .. B. ITEM OF BUSINESS 1. PRESENTATION BY POWER DYNAMIC.q C. COMMUNICATIONS FROM THE PUBLIC This is the time and place for the general public to address the City Council. State law prohibits the Council from addressing any issue not previously included on the agenda. The Council may receive testimony and sst the matter for a subsequent meeting. Comments are to be limited to five minutes per individual. D. ADJOURNMENT I, Debra J. Adams, City Clerk of the City of Rancho Cucamonga, hereby certify that a true, accurate copy of the foregoing agenda was posted on August 14, 2001, per Government Code 54954.2 at 10500 Civic Center DHve, Rancho Cucamonga, California. AUGUST 15, ~ZOOI CITY COUNCIL WORKSHOP: ENERGY AGENDA 1. Power Dynamics: Discussion of proposal to construct a power generation facility in Rancho Cucamonga. The power produced by the facility would be supplied to the City of Ran- cho Cucamonga and any excess power could be sold to the energy marketplace. 2. Energy Infonnation Program 3. The City's Energy Efforts 4. Solar Panels at the City Yard THE CITY 0 F I I l~ A N C I:1 0 CUCAMONGA Memomndum TO:. Mayor and Members of the City Council Jack Lam, AICP, City Manage~~) FROM: William J. O"Neil, City Engineer ~r c~ DATE: August 15, 2001 SUBJECT: Energy Information Program The following schedule outlines the actions and events included in the city's energy information program:. ~_~e article - The latest edition of the Grapevine included an article submitted by Engineering that included conservation tips for residents, some of the measures the city has implemented to conserve, and a list ofwebsites for additional conservation information. A copy of the article is attached. District Newsletter -- The latest issue of the Landscape and Street Lighting Districts Newsletter included an article on conservation measures in the districts. Included is information regarding the battery back-ups for the traffic signals and where to report malfunctioning street lights, especially the ones that remain on in the day time. Also included is a list of conservation tips. A copy of the newsletter is attached. Cable TV -- A list of numerous conservation tips was submitted for inclusion on the P, C3 cable channel. The list of conservation tips is now being broadcast on the city's cable channel. Information Brochure -- Engineering staff developed a brochure that includes conservation tips for residences and businesses. It also mentions some of the steps the city has undertaken to conserve at our facilities. Copies of the brochure will be made available at all of the public counters within city facilities. The a copy of the brochure is attached. Energy Workshop for Businesses -- The city is partnering with the Rancho Chamber to hold an energy workshop for businesses. The planned agenda will include remarks from the Mayor, a representative from the business community (possibly Tamco or Fontana Steel), and possibly State Senator Nell Soto. Senator Soto's office is also trying to get a representative from the California Public Utilities Commission to speak as well. The workshop is scheduled for the September 20 Chamber of Commerce meeting at the Magic Lamp restaurant. August 15, 2001 Mayor and Members of the City Council Jack Lam, AICP, City Manager Energy Information Program Page 2 Reliant Energy -- After presenting information to the Council at an energy workshop regarding their plans to construct peaker plants, Reliant Energy has dropped these plans due to federal price caps. However, they are moving forward with plans for a major plant expansion. The expansion will take approximately 2-3 years to complete. Representatives from Reliant are meeting with the Mayor and City Manager on August 15 to further discuss their proposed expansion. Power Dynamics - This company will be presenting a proposal before a workshop of the Council on August 15. The proposal includes the construction and operation of a generation facility, with the company supplying the equipment and any necessary transformation, and will perform permitting, certification, and marketing of excess output. We are researching similar projects being undertaken in other cities and have made contact with a consultant to review the Power Dynamics proposal as well as other energy related options for the city. The consultant we have in mind is currently working with the City of Corona to establish a co-generation facility with one of the major businesses,located in their area. Solar Panel Investment Opportunity - We are investigating the feasibility of installing photovoltaic solar panels at the City Yard. Several scenarios are being investigated, from installing enough panels to provide energy to operate the yard facility to installing a larger number and marketing the excess electricity. We have identified several funding opportunities and are currently contacting manufacturers for more specific information regarding cost and site requirements. We will continue to keep you updated regarding all of these items as we proceed with the energy program. Attachments -2- W .Set your:thermostat to, 'higher,duflng'~ ,, .,.? :,- ~ :./ ~i~n; could tebult ina savings, o£ as' muEh · : . - .-- - t-crisis-' as~20°/o 6n your cobli~g:l?ill. ':3 - 6uL · Set ~our {herr~o~tat at'85 deg~ebs,or' . hig~ier wllbn y~u leave,, your home , for n~o~e tha[4 four hours. Als'6,'cl~se;" ~ -~ interior drape,.and ,shades:.4i~ring ~. th.~ day. . · .~ : ,,, has ~ - ,, , '~J~,~i': ~ · Stop the sun before it hits you by ~. ,~ ~ . ;v ,. , uding exterio¥ shading devi~es like · 'ComPuter ~inOfiit?rs,~a~u,t°mati~lly~ hwnings, bamboo lfiove to ~an-energYceffi~:ient, rffgde~ . screens and shade' when not in us~ a~fte~;.appr~ximately screens, or decidu- 15 minutes,and flit. eniplo~ees shut ous plants to shade off their coml~uterst:afid:m0nitdfs fi[ your home and the close ~f the day. windows. · '" · The City's Commufiity Services · Cool naturally and Department has scheduled a series take advantage of of concerts and"movies in the park" : breezy days and to encourage families to come out nights by opening doors and for an evening of fun and to con- windows and turning off your servetheir"home"energy. cooling system-but don't forget .'~rw. consumerenergyce~ter, org safety measures! · The scheduled installation of Light (Cor~su~ner Energy Center) Emitting Diodes (LED's~ for the red ' · Turn off lights when you leave a light portion of our traffic signals room. Turn off your computer, TV, will result in a 50% savxngs of our and other electronic devices when energy consumption for traffic they're not in use. signals. · Prepare cool meals · Ail traffic signals are being retrofit- such as salads and ted with a battery back-up system sandwiches and that will maintain a "flashing red" barbecue outdoors mode of operation in the instead of using event of a rolling black- the oven. out. This will effectively turn the intersection into Th~ Grap~viN~ 11 FaLL ~001 Landscape and Street Districts Newsletter Every/(fiord,,att Counts City Energy Efficiency and Conservation Measures The city's own energy conservation program includes the following programs and actions: ~ Installation of power back-ups for elevators ~ Reduced the hours of operation for the City Hall fountain > Turned off the monument lighting > Modified all interior and exterior lighting schedules to conserve energy ~ Turned off all unnecessary lighting at city facilities > Turned offthe decorative lighting on the Foothill Boulevard median islands ~ The City Hall lighting retrofit project is currently 75% complete. This project includes changing out the lights to brighter, more efficient lighting. Another component of this project, installing LEDs in all of the EXIT signs at city facilities, is complete. The retrofit project will be completed by September 12. > The materials for the City Hall Occupancy Sensors project have been received and they will be installed by September 12. The sensors will automatically turn off the lights in a room alter sensing that the room is no longer being occupied. > Installation of battery back-up and LEDs for traffic signals. To date the back-ups have been installed at the 20 intersections listed below. Installation at all of the signalized intersections in the city, including the signals maintained by Caltrans, is scheduled to be completed by November, 2001. Milliken at Victoria Park Terra Vista at Greenway Lane Corridor Church at Spruce Rochester at Church Rochester at Chervil Rochester at Victoda Park Lane Base Line at Day Creek Victoda at East Base Line at Mountain ViewMilliken at Terra Vista Highland at Carnelian Milliken at Church Arrow at Baker Milliken at Mountain View Arrow at Red Oak Church at East Elm Etiwanda at Napa 4th at Archibald Banyan at Fredericksburg Rochester at Vintage PowerDynamics City of Rancho Cucamonga Power Project Project Proposal Construction and Operation of a 189 MW Generation Facility Submitted to: City of Rancho Cucamonga Rancho Cucamonga, California July 2001 (918) 749-7294 PowerDynamics www.power-dynamics.com Power Dynamics, Inc. ("PDI") is proposing to the City of Rancho Cucamonga the construction of a power generation facility in Rancho Cucamonga, California. Upon completion, the facility will nominally produce in excess of 189 megawatls (MW) of eleetricity using four natural gas-fired units, each producing 47.3 MW. In order to serve the immediate and critical needs of California power consumers, PDI proposes to place the units as soon as possible. The power produced by the facility will be supplied to the City of Rancho Cucamonga. Excess power can be sold to the energy marketplace through the California Power Exchange. As an additional revenue stream, steam could be marketed to a nearby facility having a need. The Project is designed to minimize impact on current noise levels and greenhouse emissions using low-NO~ tecboology. The proposed equipment consists of four General Electric LM-6000 units, featuring turboeharged generators coupled with state of the art alternators and controllers. Operating as a simple-cycle facility, these units have a heat rate of 8,250 BTU/kWhr. The LM-6000 units are one scenario. PDI bas access to a variety of equipment if the City's needs are smaller or greater than 189 MW. The configuration described above is designed to provide a starting point for discussions. Power Dy/mmics will supply the equipment and any necessary transformation and will perform permitting, certification, and marketing of excess output. Third parties will keep the equipment maintained in order to . . generate the power needed for the City during the term of the agreement. Power Dynamics will also permit the facility with the Federal Energy Regulaiory Commission to operate the facility as an Exempt Wholesale Generator, thereby giving the facility the maximum flexibility in pricing, dispatching, and customer base. Power Dynamics will arrange for fmancing of the'project, if necessary. As an alternative, PDI would be pleased to discuss having the City finance the project in exchange for the City maintaining an interest in the merchant The State of California has established an emergency committee in the Governor's office to deal with California's energy crisis. They have already relaxed many of the bureaucratic impediments normally facing power projects and have pledged support in expeditiously resolving any remaining issues. In particular, plants of 50 MW or greater are given an expedited, 21-day review process and may also be entitled to financial incentives from the State. Because of the City of Rancho Cucamonga's status as a municipality, there may be other tax credits available to the City that a corporation would not have. Additionally, the City's location may entitle it to further benefits as a member of an Economic Development Zone. July 2001 2 (918) 749-7294 PowerDynamic$ www.power-dyna mics.com Corporate Name: Power Dynamics, Inc. Mailing Address of Head Office: 4318 South Sandusky Avenue Tulsa, Oklahoma 74135 United States of America Telephone Number: (918) 749-7294 FacsimileNumber: (918) 749-7250 Web Address: www.power4ynamics.com Contact Information: Douglas M. Smith Vice President & General Counsel (918) 749-7294 dsmith~power-dynamics.com Dated at Tulsa, Oklahoma, this 24th day of July 2001. Power Dynamics, Inc. t0 Douglas'iM. Smith- Y,ce Pt~,dent & General Counse July 2001 3 (9~-8) 749-7294 PowerDynamics www.powerodyna mics.com Need for Project In the last decade, electric utilities have become increasingly dependent upon wholesale power markets to supply their energy rather than investing in generation assets. For the most part wholesale power was inexpensive and the uncertainty of deregulation made it difficult to quantify the 20 to 30 year economic horizon required for new power plant construction. In the past four years, however, capacity reserves across the nation have gone from over 30% to less than 15% because of unplanned load growth and the lack of new generation. Driven by supply and demand imbalances, wholesale power prices have reached unimaginable levels in several markets across the U.S. Several large energy companies have responded to these high margin opportunities by building large merchant plants in key areas. Many of these large simple cycle gas mrbinc based plants were paid for in a few short weeks because of the tremendous volatility in power prices. Some merchant plants, however, have produced disappointing returns so far because their markets have not been quite as lucrative as predicted.. Profitability in the wholesale power market is a matter of heing at the right place at the right time. The situation in California is even more indicative of a need for prompt action. Over the lust few decades, there has developed a geographic imbalance of power generation in the state. This imbalance has given rise to serious constraints facing large portions of the California transmission system. The past winter has seen rolling blackouts over large portions of the state. The California power market is truly ready to receive the benefits of a power solution that is easily and quickly deployable. About Power Dynamics, Inc. Power Dynamics, a Delaware corporation, has assembled a team that has worked and acquired experience together with: · Multiple equipment suppliers, manufacturers, and vendors to provide a bread array of"best in class" and leading edge products. · Developing strategic relationships with manufacturers, distributors, representatives, and other orgahizatious to facilitate rapid penetration of the marketplace. · A leveraged approach to acquiring and controlling products and hardware. · Generating immediate revenues in the emerging distributed generation markets. The Power Dynamics team has experience initiating power marketing business activities in several distinct business segments and has proved the business concepts inherent in each. Beginning with a business model that was, in effect, a leasing company, the team worked on the rapid deployment of short-term or seasonal generation capacity in markets where the value is highest. As the concept has evolved, the team proved these business models: · Energy Capacity Agreements - Analogous to the straight leasing of generation equipment, the customer is purchasing the output capacity of generation equipment rather than leasing the equipment. · Secondary Call Rights - The company retains the right to run the equipment for tho company's own benefit when the customer is not using it. · Primary Call Rights/Merchant Function- The Company places equipment for its own benefit, dispatching when the market value is highest. July 2001 4 p(918) 749-7294 PowerDynamics www.power-dyna mits.eom · Seasonal Permutations - Fully realizing thc distributed power concept by moving cquipmc*nt hetwccn summer and winter peaking opportunities. Power Dynamics is experienced in selling capacity and energy to municipalities, utilities and cooperatives, allowing them to take advantage of transmissinn credits, meet their critical peak loads, and share the upside generated by hourly trading activities. Power Dynamics can oversee the provision ora complete, turnkey service for these projects including equipment, site permitting installation, operation, and maintenance. Power Dynamics can also obtaining any necessary approvals fi.om federal or state agencies and market th~ produced power. The Power Dynamics team also lags extensive experience in stnlcturing the financing of projeets. This includes both American and foreign investment houses, as well as private- and publie-sector funding. General Project Description The proposed City of Rancho Cucamonga facility will nominally produce in excess of 189 megawatts (MW) of electrical power. The power produced by the facility will be supplied to the City of Rancho Cucamonga. Excess power, when available, can be sold to the energy marketplace through the California Power Exchange. In the future, the units could be retrofitted to become combined-cycle units and the resulting steam could also be sold to the site holder for oil and gas recovery operations. Depending on whether the power generated will actually be transmitted on the power grid or whether transfer will be accomplished via displacement at the grid, the output of the units may need to either be stepped up or down. The units have the transformation necessary to interconnect to voltages up to 69 kV. It is proposed that all equipment for the Project he installed within the fenced boundary of property owned by the City of Rancho Cucamonga. Fuel for the units will be natural gas. Because of the multiple unit enrdlguration, one unit can be serviced at a time without decreasing the output below 142 MW. Equipment specifications are included at the ea~d of this proposal as Attachment 1. Commercial Arrangements The total kilowatt-hours available per year from the units are 1,657,392,000. This is based on 189 megawatts times 365 days per year and 24 hours per day. Assuming that the California Energy Commission and the relevant Air Quality authorities approved such year-round permit, the City may have excess capacity and could operate the units on a merchant basis. Power Dynamics will obtain approval fi.om the Federal Energy Regulatory Commission (FERC) to operate the facility as an Exempt Wholesale Generator. Power Dynamics will also market any excess electricity produced to the California electric marketplace through the Power Exchange. Day-to-day operation of the Project will he through contractual arrangements with third parties. Projec~ Schedule The units could be in-service in as little as 30 days from the date of delivery, pending all necessary permits and approvals. Realistically, a four-month schedule is very achievable. July 2001 749-7294 PowerDynamics www.power-dynamic$.¢orn Location and Site Details The Project as envisioned would be located completely within a fenced boundary on land owned by the City of Rancho Cucamonga. A five-acre parcel should adequately provide the room necessary for installation, operation, and maintenance. Equipment Specifications Attachment 1 provides a more detailed description of thc equipment that will be installed as part of the Project. A pictarc ora similar project utilizing othor equipment appears on tim cover of this proposal. Fuel Supply Natural gas can be sourced offthc existing SoCal Gas Company 42-inch line. Other fie-ins may require compression, but can easily be accomplished. Step-Up Transformer and Electrical Interconnection A set of step-up transformers to 69 kV is included in the package. System Controls PDI recommends that the Project be monitored and operated using a SCADA system. As such, all instrumentation and control functions will be integrated with the City, the Operations & Maintenance entity, SoCal Gas, SoCal Edison, the City's Engineering department, and the California ISO. In the alternative, the units could be dispatched manually. July 2001 6 (91.8} 749-7294 PowerDynamics www.power-dynamics.com Air Quality Historically, the State of California has had the most stringent emissions standards of any state. Because of the pending energy situation in California, Governor Gray Davis signed a series of Executive Order with the goal of bringing 1,000 mcgawatts of new power plants to meet the electricity needs during peak demand periods. Typically these are simple-cycle power plants that can be constructed in a relatively small area, do not require water supplies for cooling, and can readily be connected to the existing transmission and natural gas system. The Governor directed the California Energy Commission to use its emergency power plant permitting authority under Public Resources Code 25705 to permit new peaking and renewable power plants that can be online by September 30, 2001. Emergency power plant projects permitted under this process are exempt from requirements of the California Environmental Quality Act. The Units are constructed to achieve extremely low emissions and will meet the State's proposed 2002 standards of 4 parts per million NOx. July 2001 7 p (918) 749-7294 ·. PowerDynamics www.power-dyna talcs, corn Public Consultation The California Governor's office has set up an e~nergency committee to address the State's power shortage. The liaison in that office has pledged support in dealing with any agencies that pose a problem in meeting an immediate in-service date. This would include the Air Quality Management Council, as well as any needed discussions with SoCal Gas and Southern California Edison. Power Dynamics has a toll-free number for interested parties at (866) 251-4015. There will also be a link at PDI's website, http://www.power-dynamics.enm/. If there is sufficient interest to warrant it, PDI wilt host an information session at a location and time to be determined. Negotiations with Current Utility The City is entitled under California law to purchase its own generation system. One unresolved issue involves whether the local utility would charge the City un exit fee for leaving its system. Historically, utilities were given the ability to charge a fee to a customer departing its system. For example, a customer under PG&E's TOU-$ rate schedule could be assessed a fee of 7% of one year's electric costs upon its exit of the PG&E system. Exit fees are somewhat subjective and may not be charged at all if the utility pereeives it will also derive a benefit, such as where an exiting customer relieves constraints on a line. The first order of business would be to see if the City would be charged any exit fee. Power Dynamics believes that the savings under its proposals more than offset any one-time exit fee, if it were assessed. Power Dynamics will assist the City with negotiations, in the event they are needed. Credits On the positive side, the City may be entitled to one or more types of credits for having its own generation. Examples include tax credits, economic development credits, and emissions credits. The State of California is constantly revising its credit structure to include various credits for self-generation and relieving transmission constraints, to name two. Exempt Wholesale Generator Status Having the facility certificated as an Exempt Wholesale Generator opens a host of other opportunities for the City. Once the FERC has approved the site as an EWG, the output t~om the units can be sold in the wholesale market at market-based rates. These "spot" rates have been very high in the past few months and could be a substantial source of revenue if the City has any excess power. Even the State's proposed price caps offer a good margin for the City. Power Dynamics has experience in obtaining EWG status for its clients and will work with the City in this regard. Power Dynamics can also assist the City in marketing any excess power. July 200'1 8 (918) 749-7294 PowerDynamics www. power-dyna mits.corn Attachment I The LI~I6000 is the most fuel-efficient simple-cycle gas turbine in__ its size class today, delivering more than 40 MW with a thermal efficiency over 40%. It provides the power and unprecedented efficiency needed by users at an installed cost that is competitive with any gas turbine. The LM6000 is suitable for a variety of Marine Applications including fast ferry and high speed cargo ship applications. Derived from the highly successful CF6-80C2 commercial aircraft engine, the LM6000 provides 54,610 shaft horsepower -- - ~ (shp) from either end of the Iow-pressure rotor system at 3,600 rpm, eliminating the need for a conventional power turbine. All . ~ ~ ~_ components incorporate corrosion-resistant materials and ~ ~ ~ .... coatings to provide maximum parts life and reliability. [ts high efficiency and installation flexibility make it ideal for a wide ~~ variety of utility power generation and industrial applications, with high potential for marine applications. High power ratings are available using GE's unique SPRINT technology. To maximize eq.uipment availability and minimize operating costs, GE provides a broad spectrum of customer services tailored to the needs of individual owners. Engine Specifications LM6000 Turbine Out, ut 57.330 Shp 42,750 KW Specific Fue~ Consumpf~:m (SFC) 0.329 Lb/shp-hr Thermal Efficiency 42% Heat Rate 6,060 BTU/shp-hr 8,125 BTU/kWs-hr 8,570 KJ/kWs-hr Exhaust Gas Flow 273 Lb/sec Exhaust Gas Temp 853 D F 456 D C Power Turbine Speed 3,600 rpm Weight 18,010 lb 8,170 kg Length 24 7.3 m Height 8.3 ft 2.5 m July 2001 p(918) 749-7294 PowerDynamics www.power-dyna mics.com Average performance, 60Hz, 59°F, sea level, 60% relative humidity, no inlet/exhaust losses, Liquid Fuel, LHV=18,400 BTU/lb. Engine Experience Zndustrial engines ophours 250 2,000,000 Unique Features: · High Thermal Efficiency · High Power-Weight Ratio Engine Options: · Dry Low Emissions (DLE) Combustion System · SPR.[NT System Capability to 47.5 MW Lightweight Commercial Marine Package LM6000 SPRINTTM (47.3 MWe) GE Aero Energy Products' LM$000 SPRZNT-- utilizes spray intercooling to boost power output of the basic LM6000 gas turbine. Benefits of the LM6000 SPRINTTM generator set include: · Up to 50 MW power generation · Full power in :[0 minutes · Baseload, cycling or peaking · Synchronous Condenser capability · More than 60 turbines sold · Dual fuel capability (distillate or gas) · More than 25,000 operating hours · Easy on-site maintenance · Full-load string tested at the factory.., no surprises at the job site. July 2001 10 p (g18} 749-7294 PowerDynamics www.power-dynamics.com Exhaust Power Heat Rate Exhaust Gas Gas Shaft Turbine LHV Temperature Flow No. of P~eseure Shafts Ratio Speed Btu/ kJI °F °C [b/s t kg/s q~m kVVe kW-hr kW-hr ~I~000 Sp~, N~ ........... ~ 4~3~ 8~0 87~ 851 4~5 ~.~J 131 ~ 30 ~00 L W H I Foundation Load , , It in m It in '" m ....... it in ~ m I lb kg July 2001 www.power-dyna mics.co m 4318 South Sandusky Avenue Tulsa, Oklahoma 74135 PowerDynamics Toll free (866) 251-4015 Fax (918) 749-7250 July 24, 2001 Via Federal Express Tracking ID 7916-1942-3570 William J. O'Neil City Engineer City of Rancho Cucamonga 10500 Civic Center Drive Rancho Cucamonga, CA 91730 Dear Mr. O'Neil: I enjoyed speaking with you last week and look forward to meeting you. As we discussed, enclosed is a proposal describing four LM~6000 units.' This proposal is merely a starting point for discussions. We will be glad to scale the size up or dow~ as you desire. I would like to meet with you next week, if possible. I understand fi"om Pat Mills that there is a meeting on August 20. Please let me know if we may attend. Thanks, Mr. O,Neil. I will call you on Wednesday to see if you have any questions. Very tmly yours, Power Dynamics, Inc./'~ ~., Vice PrUdent & General Counsel dsmith@power-dynamics.com Enclosures City of Rancho Cucamor-~ga Power Project Power Dynamics, Inc. ("PDI") is proposing to the City of Rancho Cucamonga the construction of a power generation facility in Rancho Cucamonga, California. In order to serve the immediate and critical needs of California power consumers, PDI proposes to place the units as soon as possible. The power produced by the facility will be supplied to the City of Rancho Cucamonga. Excess power can be sold to the energy marketplace through the California Power Exchange. As an additional revenue stream, steam could be marketed to a nearby facility having a need. The Project is designed to minimize impact on current noise levels and greenhouse emissions using low-NOx technology. The proposed equipment consists of four General Electric LM-6000 units, featuring turbocharged generators coupled with state of the art alternators and controllers. Operating in simple-cycle mode, the facility will nominally produce in excess of 189 megawatts (MW) of electricity using four natural gas-fired units, each producing 47.3 MW. These units have a heat rate of 8,250 BTU/kWhr. The LM-6000 units are one scenario. PDI has access to a variety of equipment if the City's needs are smaller or greater than 189 MW. The configuration described above is designed to provide a starting point for discussions. Power Dynamics will supply the equipment and any necessary transformation and will perform permitting, certification, and marketing of excess output. The City will provide the land and any necessary access. Third parties will keep the equipment maintained in order to generate the power needed for the City during the term of the agreement. Pow!er Dynamics'will also permit the facility with the Federal Energy Regulatory Commission to operate the facility as an Exempt Wholesale Generator, thereby giving the facility the maximum flexibility in pricing, dispatching, and customer base. Power Dynamics will arrange for financing of the project, if necessary. As an alternative, PDI would be pleased to discuss having the City finance the project in exchange for the City maintaining an interest in the merchant revenues. The State of California has established an emergency committee in the Governor's office to deal with California's energy crisis. They have already relaxed many of the bureaucratic impediments normally facing power projects and have pledged support in expeditiously resolving any remaining issues. In particular, plants of 50 MW or greater are given an expedited, 21-day review process and may also be entitled to financial incentives from the State. Because of the City of Rancho Cucamonga's status as a municipality, it may consider forming its own utility. By doing so, the City would retain its options as to power generation and procurement, regardless of what the State of California may enact as to direct access and choice. PowerDynamics www.power-dynamics.com Corporate Name: Power Dynamics, Inc. Mailing Address of Head Office: 4318 South Sandusky Avenue Tulsa, Oklahoma 74135 United States of America Telephone Number: (918) 749-7294 Facsimile Number: (918) 749-7250 Web Address: www.power-dynamics.com Contact Information: Douglas M. Smith Vice President & General Counsel (918) 749-7294 dsmith@power-dynamics.com Dated at Tulsa, Oklahoma, this 24th day of July 2001. Power DYnamics, Inc. ,,~ , Dougla~\M. Smith- Vice P/e~sident & General Counsel August 15, 2001 2 (918) 749-7294 ~ PowerDynamics www.power-dynamics.com Power Dynamics, a Delaware corporation, has assembled a team that has worked and acquired experience together with: · Multiple equipment suppliers, manufacturers, and vendors to provide a broad array of"best in class" and leading edge products. · Developing strategic relationships with manufacturers, distributors, representatives, and other organizations to facilitate rapid penetration of the marketplace. · A leveraged approach to acquiring and controlling products and hardware. · Generating immediate revenues in the emerging distributed generation markets. The Power Dynamics team has experience initiating power marketing business activities in several distinct business segments and has proved the business concepts inherent in each. Beginning with a business model that was, in effect, a leasing company, the team worked on the rapid deployment of short-term or seasonal generation capacity in markets where the value is highest. As the concept has evolved, the team proved these business models: · Energy Capacity Agreements - Analogous to the straight leasing of generation equipment, the customer is purchasing the output capacity of generation equipment rather than leasing the equipment. · Secondary Call Rights The company retains the right to mn the equipment for the company's own benefi~ when the customer is not using it. · Primary Call Rights/Merchant Function - The Company places equipment for its own benefit, dispatching when the market value is highest. · Seasonal Permutations Fully realizing the distributed power concept by moving equipment between summer and winter peaking opportunities. Power Dynamics is experienced in selling capacity and energy to municipalities, utilities and cooperatives, allowing them to take advantage of transmission credits, meet their critical peak loads, and share the upside generated by hourly trading activities. Power Dynamics can oversee the provision of a complete, turnkey service for these projects including equipment, site permitting, installation, operation, and maintenance. Power Dynamics can also obtaining any necessary approvals from federal or state agencies and market the produced power. The Power Dynamics team also has extensive experience in structuring the financing of projects. This includes both American and foreign investment houses, as well as private- and public-sector funding. Current Projects Power Dynamics is currently working on the development of sites representing over 1,000 MW. These sites are in California, Alberta, and New York City and represent a variety of projects utilizing simple-cycle, combined- cycle, natural gas turbines, reciprocating engines, and combinations of each. PDI is under confidentiality agreements with several of these sites' investors and landowners. As discussions with the City progress and the parties enter into agreements protecting confidential information regarding these sites, PDI will most enthusiastically forward further information. August 15, 2001 3 PowerDynamics www.power-dynamics.com Need for Project In the last decade, electric utilities have become increasingly dependent upon wholesale power markets to supply their energy rather than investing in generation assets. For the most part wholesale power was inexpensive and the uncertainty of deregulation made it difficult to quantify the 20 to 30 year economic horizon required for new power plant construction. In the past four years, however, capacity reserves across the nation have gone from over 30% to less than 15% because of unplanned load growth and the lack of new generation. Driven by supply and demand imbalances, wholesale power prices have reached unimaginable levels in several markets across the U.S. Several large energy companies have responded to these high margin opportunities by building large merchant plants in key areas. Many of these large simple cycle gas turbine based plants were paid for in a few short weeks because of the tremendous volatility in power prices. Some merchant plants, however, have produced disappointing returns so far because their markets have not been quite as lucrative as predicted. Profitability in the wholesale power market is a matter of being at the right place at the right time. The situation in California is even more indicative of a need for prompt action. Over the last few decades, there has developed a geographic imbalance of power generation in the state. This imbalance has given rise to serious constraints facing large portions of the California transmission System. The past winter has seen rolling blackouts over large portions of the state. The California power market is truly ready to receive the benefits ora power solution that is easily and quickly deployable. General Project Description The proposed City of Rancho Cucamonga facility will nominally produce in excess of 189 megawatts (MW) of electrical power. The power produced by the facility will be supplied to the City of Rancho Cucamonga. Excess power, when available, can be sold to the energy marketplace through the California Power Exchange. In the future, the units could be retrofitted to become combined-cycle units and the resulting steam could also be sold to the site holder for oil and gas recovery operations. Depending on whether the power generated will actually be transmitted on the power grid or whether transfer will be accomplished via displacement at the grid, the output of the units may need to either be stepped up or down. The units have the transformation necessary to interconnect to voltages up to 69 kV. It is proposed that all equipment for the Project be installed within the fenced boundary of property owned by the City of Rancho Cucamonga. Fuel for the units will be natural gas. Because of the multiple unit configuration, one unit can be serviced at a time without decreasing the output below 142 MW. Equipment specifications are included at the end of this proposal as Attachment 1. Commercial Arrangements The total kilowatt-hours available per year from the units are 1,657,392,000. This is based on 189 megawatts times 365 days per year and 24 hours per day. Assuming that the California Energy Commission and the relevant Air Quality authorities approved such year-round permit, the City may have excess capacity and could operate the units on a merchant basis. August 15, 200~i 4 ~ (918) 749-7294 PowerDynamics www.power-dynamics.com Power Dynamics will obtain approval from the Federal Energy Regulatory Commission (FERC) to operate the facility as an Exempt Wholesale Generator. Power Dynamics will also market any excess electricity produced to the California electric marketplace through the Power Exchange. Day-to-day operation of the Project will be through contractual arrangements with third parties. Project Schedule The units could be in-service in as little as 30 days from the date of delivery, pending all necessary permits and approvals. Realistically, a six-month schedule is very achievable. August 15, 2001 5 ~ (918) 749-7294 PowerDynamics www.power-dyna mics.com Location and Site Details The Project as envisioned would be located completely within a fenced boundary on land owned by the City of Rancho Cucamonga. A five-acre parcel should adequately provide the room necessary for installation, operation, and maintenance. Equipment Specifications Attachment 1 provides a more detailed description of the equipment that will be installed as part of the Project. A picture ufa similar project utilizing Solar Taurus units appears on the cover of this proposal. Fuel Supply Natural gas can be sourced off the existing SoCal Gas Company 42-inch line. Other tie-ins may require compression, but can easily be accomplished. Step-Up Transformer and Electrical Interconnection A set of step-up transformers to 69 kV is included in the package. System Controls PDI recommends that the Project be monitored and operated using a SCADA system. As such, all instrUmentation and control functions will be integrated with the City, the Operations & Maintenance entity, SoCal Gas, SoCal Edison, the City's Engineering department, and the California ISO. In the alternative, the units could be dispatched manually. ^ugust t 5, 200t 6 ~ (91.8) 749-7294 PowerDynamics www.power-dynamics.com Air Quality Historically, the State of California has had the most stringent emissions standards of any state. Because of the pending energy situation in California, Governor Gray Davis signed a series of Executive Order with the goal of bringing 1,000 megawatts of new power plants to meet the electricity needs during peak demand periods. Typically these are simple-cycle power plants that can be constructed in a relatively small area, do not require water supplies for cooling, and can readily be connected to the existing transmission and natural gas system. The Governor directed the California Energy Commission to use its emergency power plant permitting authority under Public Resources Code 25705 to permit new peaking and renewable power plants that can be online by September 30, 2001. Emergency power plant projects permitted under this process are exempt from requirements of the Califomia Environmental Quality Act. The Units are constructed to achieve extremely low emissions and will meet the State's proposed 2002 CARB standards of 4 parts per million NOx. Au§ust 15, 2001 7 ~ (918) 749-7294 PowerDynamics www.power-dynamics.com Public Consultation The California Governor's office has set up an emergency committee to address the State's power shortage. The liaison in that office has pledged support in dealing with any agencies that pose a problem in meeting an immediate in-service date. This would include the South Coast Air Quality Management District, as well as any needed discussions with SoCal Gas and Southern California Edison. During a project's development, Power Dynamics normally sets up its toll-free number for interested parties at (866) 251-4015. There is also be a link at PDI's website, http://www.power-dynamics.com/. If there is sufficient interest to warrant it, PDI then hosts an information session at a location and time to be determined. Pending Regulation A topic on everyone's mind is the status of direct access in the State. A decision regarding direct access is expected on Thursday, August 23. Opinions as to what will happen are numerous. It is possible that the State could completely close access to choice. A more likely scenario is that some form of direct access will remain. Regardless of the fate of direct access, the City as a municipality has many more options available to it than do enduser or corporate facilities. Power Dynamics is currently working with municipalities wishing to become their own municipal district. Negotiations with Current Utility One other unresolved issue involves whether the local utility would charge the City an exit fee for leaving its system. Historically, utilities were given the ability to charge a fee to a customer departing its system. For example, a customer under PG&E's TOU-8 rate schedule could be assessed a fee of 7% of one year's electric costs upon its exit of the PG&E system. Exit fees are somewhat subjective and may not be charged at all if the utility perceives it will also derive a benefit, such as where an exiting customer relieves constraints on a line. The first order of business would be to see if the City would be charged any exit fee. Power Dynamics believes that the savings under its proposals more than offset any one-time exit fee, if it were assessed. Power Dynamics will assist the City with negotiations, in the event they are needed. Credits On the positive side, the City may be entitled to one or more types of credits for having its own generation. Examples include tax credits, economic development credits, and emissions credits. The State of California is constantly revising its credit structure to include various credits for self-generation and relieving transmission constraints, to name two. Exempt Wholesale Generator Status Having the facility certificated as an Exempt Wholesale Generator opens a host of other opportunities for the City. Once the FERC has approved the site as an EWG, the output from the units can be sold in the wholesale market at market-based rates. These "spot" rates have been very high in the past few months and could be a August 15, 2001 8 (918) 749-7294 ~ PowerDynamics www.power-dynamics.com substantial source of revenue if the City has any excess power. Even the State's proposed price caps offer a good margin for the City. Power Dynamics has experience in obtaining EWG status for its clients and will work with the City in this regard. Power Dynamics can also assist the City in marketing any excess power. Au§ust 15, 200'i 9 PowerDynamics www,power-dynamics.com - Power Heat Rate Exhaust Gas Exhaust Turbine LHV Temperature Gas Flow No. of Pressure ~ Shaft Shafts Ratio Speed rpm Btu/ k J/ °F °C Ib/s kg/s kWe kW-hr kW-h LM6000 SPRINT 47300 6250 8704 851 455 288 131 2 30 3600 Base Plate Enclosure Dimensions I Base Plate L W H Foundation Load ffin m ffin m flin m I kg 56 6 17.2 13 6 4.1 14 6 4.4 476000 215910 August 15, 2001